As planting approaches this year, Russia/Ukraine conflict headlines have taken a back seat to concerns over China’s struggling economy and a continued lackluster demand profile for U.S. grains and oilseeds. The grains and oilseeds market as a whole has had to pivot – now trying to encourage demand versus the demand-rationing we have seen in the past two seasons. 

Let’s focus first on the corn market. The U.S. corn export program has done a fine job keeping up with the U.S. Department of Agriculture’s (USDA’s) export estimate. Unfortunately, a competitive South American corn export program has kept U.S. corn prices suppressed in order to remain competitive in the world export market. Come spring, Brazil’s export program is expected to ramp up as their larger second crop corn harvest enters the market with trade closely watching how the U.S. corn price may react. When looking at the balance sheet, U.S. corn ending stocks are estimated to be quite large and comparable to levels not seen since 2016 to 2018. Without either a large reduction in acres this spring or a substantial adverse weather event, it may be tough to see ending stocks contract significantly. This could likely provide resistance on rallies throughout the year as the market switches to an environment in which we need to encourage demand versus rationing it, as we have seen the past two growing seasons.

Heading to planting, weather analysts are projecting a return to a La Niña weather pattern this spring into summer. This weather shift from a wet and cool U.S. growing season to the potential for hot, dry conditions may spark some volatility in the markets. While the corn market has ample margin for error on the balance sheet, the soybean complex remains tighter stateside. Currently, soybean ending stocks are projected to rise year-over-year, however, with less of a margin for error as compared with corn. This would indicate that worries of drought and production issues could be more impactful to the bean complex. Similar to the corn market, the U.S. soybean export program has faced stiff competition with South America. This has kept pressure on U.S. prices as ample world supplies have made the U.S. a follower of world prices. With a large and growing world ending stocks estimate for soybeans, U.S. soybeans will likely continue this trend of being a world price follower unless there is a substantial weather issue in the U.S. this growing season. 

Unlike last year, headlines about the Russia/Ukraine conflict have faded in their market moving ability. Cheap supplies of world wheat – specifically from Russia – has kept a lid on U.S. prices. In Canada, exports and domestic disappearance have both run ahead of their five-year averages. Unfortunately, in the U.S., wheat has largely continued its trend of falling exports year-over-year, and remains uncompetitive for the most part in the world export market. Although world prices remain low, major exporting nations’ stocks to use are still perched near record lows. This, on its own, is not a reason for the market to rally, but it does underscore the risk to trade if supply issues arise with the Northern Hemisphere crop.

Moving forward, focus will soon shift away from the South American crop and on to the U.S. Heading into the spring, trade will closely monitor how the U.S. wheat crop comes out of dormancy, as well as the prospect of a returning La Niña weather pattern in the summer. Increasing tensions between Russia and Ukraine is still a factor to watch for, however, trade has largely discounted any major supply disruption arising from the conflict as we come out of the winter.